Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

Regulation Roundup: Part One

Regulatory update

Keeping up with regulatory change is tough for busy operational managers. But even a working knowledge of what is coming down the pike prepares you for the possible impacts of new legislation and regulation.

To help you stay on top of the various initiatives now underway, and assess the potential changes to your business operating environments, here is a snapshot of the legislative and regulatory pipeline. This week we look at three broad topics: reauthorization of the Transportation Bill, Compliance, Safety, Accountability (CSA) , and new rules from the California Air Resource Board (CARB).

Before we get into the details let’s clarify the difference between a rulemaking and a law, a distinction that often confuses DC observers. In general when laws are passed Congress either authorizes or delegates powers to relevant agencies or takes a more direct approach by actually setting the rules. When agencies are given the power to implement new legislation, they go through formal rulemakings to enact and shape the boundaries of the rules within the broad authority specified by Congress. Rulemakings do not require any additional input from Congress, but have to be cleared by the Executive branch.

1)  Transportation Re-authorization

What it is:

This is an important bill that would allocate money and funds to infrastructure and road projects. Typically these bills are passed every 5-6 years. The last bill was called “SAFETEA-LU” (Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users).  The latest iteration is dubbed “reauthorization” because the initial authorization has expired.  The legislation has been extended on an interim basis until a longer term solution can be negotiated.

This bill is not just about infrastructure.  It also includes changes to regulatory structure (the agencies that oversee infrastructure), as well as changes to related policies and rules such as how transportation projects are processed and provider oversight.

Proponents:

Most businesses rely on a strong infrastructure to efficiently move goods to market. This bill will help build roads, maintain bridges, dredge ports, and unclog bottlenecks. It is also viewed as a creator of jobs. There is a large coalition of organizations supporting this bill, including business organizations such as the U.S. Chamber of Commerce, the National Association of Manufacturers, many transportation and other industry groups. Proponents back the need for a strong bill and a national focus on infrastructure as a key national competitive advantage.  

Opponents:

While few groups oppose the transportation reauthorization overall, there are disagreements over spending priorities and on how to pay for the proposals.  Fuel taxes have been the primary funding source for transportation authorizations. Many groups such as the American Trucking Association are supporting an increase in the gas and diesel tax as the simplest and most efficient way to pay for infrastructure. The transportation industry is almost completely unified in its request to fund the bill through an appropriate increase in the diesel tax. However, given the poor U.S. economy many believe few, if any politicians will want to vote on a tax increase. It is notable that some conservative senators recently said that funding infrastructure is a core function of government.

Status:

This bill is a large, multi-year piece of legislation with a number of funding source challenges. Some funding could come from a gas tax or diesel tax, but as mentioned above this is not a popular option. That said, there is a general feeling in the industry that this bill will pass; it is a matter of when and how it comes to a vote.

An important side note to infrastructure: the U.S Chamber of Commerce is developing a larger index to track the health of infrastructure. C.H. Robinson is a founding sponsor of the Chamber’s Infrastructure Index.

Possible Impact on the shipping community:

Delays in infrastructure maintenance and improvements will slow goods to market and result in incremental costs that will be absorbed slowly throughout the supply chain.

2)  Compliance, Safety, Accountability (CSA)

What it is:

The CSA initiative is a comprehensive review, analysis, and restructuring of the truckload carrier industry’s safety fitness determination process and enforcement programs run by the Federal Motor Carrier Safety Administration (FMCSA).  For more information, visit: http://csa2010.fmcsa.dot.gov/outreach_sessions.aspx

The draft rule that will link the BASIC data directly to the safety rating is tentatively scheduled to be released in December 2011.  Currently, to get a safety rating, carriers must go through an intensive 2-3 day onsite compliance review. There are a limited number of authorized inspectors for thousands and thousands of carriers. It’s just not a sustainable process.  The future structure will no longer require the formal review, but it will instead be data-based. Many shippers are unaware that there is another significant step in the CSA program coming out in December. The current thresholds set within the BASIC’s are designed to get the carriers on FMCSA’s radar early so they can be prioritized for compliance reviews. FMCSA intends to redraw those thresholds so they will correlate directly to safety ratings through the rulemaking that is still to be issued.

Proponents/opponents:

Since the draft rule has not been released, the arguments for and against the regulations have yet to take shape. One question already developing, though, is whether industry would be better served by eliminating the conditional or marginal rating and simply go with a two-tiered fit or unfit system.

Status:

The rule linking the BASIC data to the safety rating is known as the Safety Fitness Determination rule. It is tentatively scheduled to be released in draft form in December of 2011.

Possible Impact on the shipping community:

There is considerable confusion around the difference between Safety Ratings and the BASIC data that is publicly available. This has led to many discussions about proper risk assessment and carrier qualification practices for shippers.

3) California Air Resource Board (CARB) TRU Rule Proposed Amendments

What it is:

CARB is proposing to hold shippers, brokers, and receivers responsible for using CARB compliant refrigerated units and carriers when loads originate, are delivered to or transit California. CARB requires these refrigerated units to be newer or retrofitted equipment to meet strict emissions guidelines. In this year’s proposed amendments, CARB has proposed that shippers, brokers, and receivers can be subject to fines for using or arranging for a non-CARB complaint carrier to transport their freight. In addition, they have proposed that all parties names and contact information represented by the load be given to the driver so enforcement authorities will know who is liable for fines and penalties.

Proponents:

Air quality in California has been deemed “out of attainment” by the federal Environmental Protection Agency. In response, the CARB has placed strict rules around dray/port operations, refrigerated trucking operations, and general trucking operations in order to combat the poor air quality.

Opponents:

CARB rules require significant equipment investment and many carriers feel that the state agency does not have the authority to regulate what transportation providers do if they are based out of state. This has created significant tension between those carriers that have complied with CARB rules and invested in the compliant equipment, and those that have not.

Status:

CARB recently had a third public workshop on this topic and will likely vote on the proposed amendment in November of this year. There is a chance that CARB staff will change some of the language in the proposed rule, but the intent to hold shippers, brokers, and receivers responsible for compliance is their goal in order to increase compliance by the carrier base as a whole.

Possible Impact on the shipping community:

If this proposed amendment is approved by the CARB board, shippers might have to screen much more stringently than they currently do for CARB compliant refrigerated carriers. Furthermore, shippers may be subject to fines if they use non-CARB compliant carriers. Available refrigerated capacity could be impacted by this proposed rule.

That’s it for now. Next week, we’ll consider Hours of Service Rules, federal truck weight standards, and the introduction of electronic on board recorders. Please post your thoughts or questions or connect directly with Jason Craig for further information.

Jason Craig is C.H. Robinson’s Government Affairs Manager. This summary represents his opinions, thoughts, and observations, that are not necessarily those of C.H. Robinson Worldwide, Inc.

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